Jazz Inks $7.2B Deal To Buy GW Pharmaceuticals

Jazz Pharmaceuticals on Feb. 3 announced the acquisition of GW Pharmaceuticals for a total consideration of $7.2 billion.

As part of the deal, Jazz will snap up GW (GWPH) for $220 per ADS (American Depository Share), which consists of $200 in cash and $20 in Jazz stock per share. GW shares closed 45% higher on Feb. 3, while Jazz fell 3.9%.

Jazz Pharmaceuticals (JAZZ) expects to close the deal in the second quarter of this year. With this acquisition, the company will add GW’s key product, Epidiolex (cannabidiol) to its drug portfolio. Epidiolex is GW’s cannabis-based drug that is approved by the US Food and Drug Administration (FDA) for the treatment of epilepsy. GW has earned around $510 million in annual sales of Epidiolex within two years of its launch.

Jazz Pharmaceuticals’ CEO, Bruce Cozadd said, “We are excited to add GW’s industry-leading cannabinoid platform, innovative pipeline and products, which will strengthen and broaden our neuroscience portfolio, further diversify our revenue and drive sustainable, long-term value creation opportunities.” (See Jazz Pharmaceuticals stock analysis on TipRanks )

Following the announcement, Cowen & Co analyst Ken Cacciatore raised the price target from $180 to $190 and maintaining a Buy on the stock.

Cacciatore said, “Jazz is acquiring GW which further diversifies the revenue/pipeline, bringing Epidiolex in epilepsy and Nabiximols for MS [Multiple Sclerosis] spasticity in Phase III. Put simply, we like this transaction as we believe in Jazz’s ability to analyze difficult IP [intellectual property] situations, which is key to valuing Epidiolex’s durability. And with likely success of Nabiximols (that is not factored by the Street), this deal works.”

The rest of the Street is cautiously optimistic about JAZZ with a Moderate Buy consensus rating. That’s based on 6 analysts recommending a Buy, 1 analyst suggesting a Hold, and 1 analyst says Sell. The average analyst price target of $173.71 implies approximately 15% upside potential to current levels.

According to TipRanks Similar Stocks comparative tool, JAZZ has had the highest yearly gain of 10.9% among peers in the pharmaceutical industry.

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